If the Labour Market Is Perfectly Competitive, Labour Demand Function

question 14

Multiple Choice

If the labour market is perfectly competitive, labour demand function is given by ND = a + bW and labour supply function is given by NS = c + dW; W is the wage rate. After imposing a payroll tax T, market equilibrium wage rate will be:

• A) higher than before the tax, and the firm pays b/(b - d) share of the tax.
• B) lower than before the tax, and workers pay b/(b - d) share of the tax.
• C) higher than before the tax, and workers pay b/(b - d) share of the tax.
• D) lower than before the tax, and the firm pays b/(b - d) share of the tax.
• E) equal to before the tax.

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Definitions:

Residents

Individuals who inhabit a certain locality or area, often used in the context of people living within a specific city, town, or country.

Location

The geographical place or position where something is situated or occurs.

Small Business Owner

An individual who owns and operates a business of small size, defined by revenue, assets, or number of employees.

Middleman Intermediaries

Entities that facilitate transactions between buyers and sellers by acting as a link, often helping in the distribution or selling of goods and services.